Business

Thursday 23 January 2020

World tensions won't derail US economy, says Fed president

 

Chicago Federal Reserve Bank President Charles Evans. Photo: Bloomberg
Chicago Federal Reserve Bank President Charles Evans. Photo: Bloomberg

Matthew Boesler

The US economy should continue to grow at a healthy pace despite emerging geopolitical risks and extended weakness in manufacturing, Federal Reserve Bank of Chicago president Charles Evans said.

The "events in Iraq, I think, are certainly a question mark, and oil prices are up a little bit, but I think we've got a pretty good, robust, resilient economy," Evans told Bloomberg Television.

Stocks fell on Friday after news that the US had killed a top Iranian general in an airstrike in Iraq, escalating tensions in the Middle East and sending oil prices soaring.

In the US, a widely-followed gauge of business activity in the manufacturing sector published on Friday unexpectedly dropped to the lowest level since 2009, signalling a worsening contraction.

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"I think we've found that the economy can continue to grow even when manufacturing is contracting just a little bit, so I'm hopeful that we've got a really resilient economy at the moment," said Evans, who supported all three Fed interest-rate cuts in 2019 but doesn't hold a policy vote in 2020.

The US unemployment rate fell to 3.5pc in November, matching a half-century low, and has spent most of the last two years below 4pc. Yet inflation is below the Fed's 2pc target, as it's been throughout most of the last decade, confounding policy makers who expected a tighter job market would put upward pressure on consumer prices.

Bloomberg

Bloomberg

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